Insurers are seeing more opportunity in global markets. In fact, with growth slowing in mature markets, 88 percent of global insurance CEOs see greater potential in the still-under-penetrated emerging markets of South America, Asia, Africa and the Middle East, according to a report from PwC.
Allianz Global Corporate & Specialty AG (AGCS) is one of those insurers looking to new markets. It recently launched a legal entity known as Allianz Global Corporate & Specialty Resseguros Brasil (AGCS Brazil). Through the launch, AGCS aims to triple its premium income from emerging markets in the next five years, and Brazil is an important cornerstone in realizing its growth strategy, according to the January announcement. Brazil represents about 50 percent of the market potential to AGCS in South America, and after enhancing operations in Brazil, AGCS will look to further expand across South America. "Our staff is a combination of local insurance insiders and selected foreign experts with proven global experience," says Drault Ernanny, head of market management in Brazil. "Applying global industry standards, but also following local best practices will enable us to better serve our Brazilian clients."
With strategies like AGCS' comes data challenges, including understanding and incorporating telematics and third-party data into their modeling. Technology and data standards could aid insurers in overcoming these challenges.
In the same February 2013 PwC report, "Coming to Grips with Market Transformation," which was based on a survey of 92 insurance CEOs in 39 countries, 86 percent of insurance industry leaders said they are planning to increase investment in technology over the next 12 months. And, yet, few insurers are comfortable with using new data sources and analytical techniques to shape decision-making.
"Insurers are facing a transition point now between the way they traditionally do things and the new competitive way of doing things, either in the cloud or the big data platform. And sometimes it's a combination of the two," says Anand Rao, a partner at PwC. "They're asking: 'Is it worth my while to shift everything into the way the big data proponents talk about,' and 'can I get everything on the cloud and get a few of these so-called data scientists to go and crunch [numbers] for me or do I still need all of my legacy and structured data, my data standards, my data governance, everything that I'm used to that I've been spending the past couple of decades on?' Some of the leading companies have done exploratory work around the big data. [They're considering] to what extent they can use structured and unstructured data without any of the data standards or the data quality, how useful is it and what insights they can generate from that. They have started some of the pilots now in that area."
Telematics
Telematics is one of the emerging technologies getting the attention of insurers and the Association for Cooperative Operations Research and Development (ACORD), a standards-setting organization for the insurance industry.
"Every telematics device manufacturer and telematics service provider uses their own proprietary format for transmitting telematics data," says Mark Woods, an architect at Allstate and the chairperson of ACORD's P&C Telematics Working Group. "This drives up integration costs for carriers wanting to obtain data from a variety of potential data sources."
For the working group, which has been meeting twice a month for the past year, this is the key challenge it's addressing. "By providing a standard for others to follow, we can enable carriers to build solutions that support a wide range of telematics data sources for less than it would cost to support each data source individually," Woods says.
The group currently is defining its first telematics message, which includes three different types of event information that will be recorded, says James Bielak, P&C program manager at ACORD. The first is a notice of a threshold-breaking event between a carrier and a telematics service provider (TSP). For example, the insurer and the TSP may have previously defined hard braking as slowing at a rate of 6 mph per second. If a driver does so, there is a notice. "This is information in the XML stream, and we don't really associate any data with it," Bielak says. "We're leaving it very vague in executive summary, and important in the event is that you will get a date and a time stamp and you'll also know which device in the vehicle reported the event."
The next category of information is streamed data, the data that a device will spit out every second, every five seconds, 30 seconds, whatever the granularity that the device is configured to report, Bielak explains. And the third category is summary reports, which analyze the events, the summary of bad behaviors and the whole stream of data, second-by-second.
"I'm excited about the progress the working group has made. While the specification is not yet complete, we are getting close to a point where we are ready to submit it for review," Woods says. "I am looking forward to a time when this specification begins to see adoption amongst the telematics service providers, enabling carriers to spend more time on their usage-based insurance offerings and less on the technical means for obtaining telematics data."
Telematics is a prime example of technology driving global platform adoption, according to Lloyd Chumbley, ACORD's VP, standards. "Companies want to leverage the use of telematics in ways that enable them to be consistent in their use worldwide. I heard the exact same story about telematics in three different countries," Chumbley says, referring to a number of policy concerns and opportunities when a car crosses country borders. For example, if the car was stolen, it would be easier to locate. But, also, it could be that the car entered an area where it's not covered, and the policyholder may have the ability to text back for immediate coverage, Chumbley says. The third is just to let the policyholder know that he or she entered into an area that is generally considered a higher risk area.
"I've heard that exact same story in the United States, Australia and South Africa," Chumbley says. "So if they're going to write systems to do things like that, and a company's doing business in all three, they don't want to write three systems. As [global insurers] start to leverage some of these technologies, they don't want to utilize them in just one area, they want to create a global platform. So as we've been seeing, there are two major thoughts that go on as it relates to standards in supporting these global platforms. You've got to be able to recognize the local differences, coverages, those sorts of things that exist, but at the same time you want to have a very clear harmonization plan. If you're going to be on a single platform, you've got to be able to harmonize those differences. That harmonization is what we've seen driving a lot of the expansion of ACORD; because it's easier to harmonize something where the only difference is two or three fields, plus coverage types, than it is trying to harmonize something that is created totally separate, with a separate structure. So, that second harmonization piece is really the driving force for us."
